chpt 11 & 10

1.

1 point

The multiplier effect means that

an increase in spending can cause aggregate demand to change by a larger amount

an increase in consumption can result in a larger increase in government purchases

a small decline in MPC can cause aggregate demand to rise by several times that amount

consumption is typically several times larger than withdrawals

2.

1 point

An increase in taxes will have a greater effect on equilibrium output

if the tax revenues are redistributed through transfer payments

the smaller the MPC

the larger the MPC

the larger the MPW

3.

1 point

Ceteris paribus(all other things the same), serious recessions in the economies of our major trading partners will tend to:

stimulate real output and employment in our economy

depress real output and employment in our economy

cause inflation in our economy

have no perceptible impact upon our economy

4.

1 point

We would expect an increase in input productivity to

shift the aggregate demand curve leftward

reduce equilibrium real output

shift the aggregate supply curve rightward

increase the equilibrium price level

5.

1 point

Increases in the total real output of many low-income countries do not increase the nation's standard of living because

diminishing returns may be encountered in increasing total output

surplus farm labour may move from rural areas to industrial areas and, thereby, cause unemployment

population increases may dissipate the increase in real output

the oversupply of workers in manufacturing will persist

6.

1 point

Ceteris paribus, a decrease in an economy's exports will

lower the marginal propensity to save

increase aggregate expenditures and therefore increase equilibrium GDP

tend to be inflationary

decrease aggregate expenditures and therefore decrease equilibrium GDP

7.

1 point

. Economic growth can be portrayed as a

. movement from a point on to a point inside a production possibilities curve

rightward shift of the production possibilities curve

leftward shift of the production possibilities curve

movement from one point to another point on a production possibilities curve

8.

1 point

If government purchases increase by $20 billion and aggregate demand shifts rightward by $30 billion as a result, we can conclude that:

. the spending multiplier is 2.00

the MPW for this economy is 0.33

unemployment is rising

the MPC for this economy is 0.33

9.

1 point

What will be the effect of positive unplanned investment

an unintended reduction in inventories by businesses

a decline in the rate of interest

a fall in the price level

a rise in the price level

10.

1 point

Functional finance:

is designed to increase the MPC in the interest of greater macroeconomic stability

leads to cyclically balanced budgets

leads to annually balanced budgets

treats the government budget primarily as a means of stabilizing the economy

11.

1 point

Which of the following could be considered to be the best measure of an improvement in living standards

an increase in real GDP

an increase in nominal GDP

an increase in real per capita GDP

an increase in gross investment

12.

1 point

Which of the following statements is correct?

Government purchases increase, but taxes decrease, real output.

Neither government purchases nor taxes affect real output.

Government purchases and taxes both increase real output

Government purchases and taxes both decrease real output

13.

1 point

Which of the following would not shift the aggregate supply curve?

a decline in business taxes

an increase in the price level

an increase in labour productivity

a decline in the price of imported oil

14.

1 point

The public debt

refers to the collective amount that Canadians owe to foreigners

consists of the total debts of Canadian provincial and territorial governments

refers to the debts of Canadian governments, businesses, and households

consists of the accumulation of all past federal deficits minus any federal surpluses

15.

1 point

Ceteris paribus, the real interest rate and the level of planned investment are

directly related

related only when saving and investment are equal

unrelated

inversely related

16.

1 point

Which of the following statements is not correct?

The public debt has usually increased during wartime.

Provincial and territorial deficits were higher in the early 2000s than they were in the early 1990s

About a fifth of all Canadian government debt is held by foreigners

There is a tendency for the public debt to grow during recessions

17.

1 point

An economy faces an inflationary gap. Which of the following is the appropriate government fiscal policy

an increase in the size of income tax exemptions for each dependent

an increase in the federal Goods and Services Tax (GST)

. an increase in soil conservation subsidies to farmers

the passage of legislation providing for the construction of 8000 new post office buildings

18.

1 point

What do the wealth and foreign trade effects have in common? They both help to explain:

shifts in the aggregate supply curve

why the aggregate demand curve is downward-sloping

shifts in the aggregate demand curve

why the aggregate supply curve is upward-sloping

19.

1 point

Fiscal policy refers to

the authority that the Prime Minister has to change personal income tax rates

. changes in government purchases or taxes that have the effect of destabilizing the economy

changes in taxes and government purchases made by legislation for the purpose of stabilizing the economy

. changes in the money supply and interest rates by the Bank of Canada

20.

1 point

According to John Maynard Keynes

Say's Law is correct, because total withdrawals and injections can be equal at any output

workers suffer from money illusion

because of the workings of demand and supply in the labour market, involuntary unemployment is no more than a short-run problem

interest rates, not output levels, automatically bring about a balance between total injections and withdrawals

21.

1 point

The effect of a contractionary fiscal policy upon the equilibrium level of real output is substantially the same as a(n

increase in investment

increase in saving

decrease in saving

increase in exports

22.

1 point

If an economy's MPC is 0.5, then, based on the aggregate expenditures model, a simultaneous increase in both taxes and government purchases of $20 billion will:

decrease GDP by $40 billion

increase GDP by $20 billion

leave GDP unchanged

decrease GDP by $20 billion

23.

1 point

According to New Growth Theory, the factor that traditional theories of economic growth tended to downplay was

knowledge

labor

natural resources other than land

capital

24.

1 point

. The aggregate demand curve:

shows the amount of real output that will be produced at each possible price level

. is upward-sloping, because a higher price level makes production more profitable

. is downward-sloping, because a higher price level makes production more profitable

shows the amount of real output that will be purchased at each possible price level

25.

1 point

The recent switch of labour from manufacturing to the service sector has

been inflationary

had no effect upon labour productivity

increased the growth of labour productivity

dampened the growth of labour productivity

26.

1 point

. According to neoclassical economists before John Maynard Keynes

the forces of demand and supply in the labour market will automatically eradicate involuntary unemployment

both the demand and supply of labour depend on the nominal wage rate

involuntary unemployment can be a long-run problem

while the demand for labour depends on the nominal wage rate, the supply of labour depends on the real wage rate

27.

1 point

Which one of the following would not shift the aggregate demand curve

a decline in the interest rate at each possible price level

a change in the price level

an increase in personal income tax rates

a depreciation of the international value of the Canadian dollar

28.

1 point

If Canada wants to increase its net exports, it might take steps to

decrease the price of the Canadian dollar in terms of foreign currencies

increase its GDP

reduce existing tariffs and import quotas

increase the price of the Canadian dollar in terms of foreign currencies

29.

1 point

What do investment and government purchases have in common?

Both are influenced by the wealth effect

Both represent injections to the income-spending stream

Neither affects aggregate demand

Both represent withdrawals from the income-spending stream

30.

1 point

Automatic stabilizers operate in which of the following ways?

With given tax rates and government spending policies, a rise in GDP will tend to produce a budget surplus, while a decline will tend to result in a deficit

Parliament will automatically change the tax structure and spending programs to correct upswings and downturns in business activity.

An annually balanced budget will automatically tend to offset the destabilizing effects created by provincial and territorial governments and, thereby, stabilizes the economy.

Tax rates are automatically increased during recessions and decreased during inflationary periods

31.

1 point

Economists are in general agreement that fiscal policy will stabilize the economy most when:

. deficits are incurred during recessions and surpluses are incurred during booms

deficits are incurred during booms and surpluses are incurred during recessions

budget surpluses are continually incurred

the budget is balanced each year

32.

1 point

Assume that the economy is in the midst of a severe recession. Which of the following policies would be appropriate?

a proposal to run a federal surplus

a reduction in federal tax rates on personal and corporate income

a postponement of a highway construction program

a reduction in agricultural subsidies and veterans' benefits

33.

1 point

The changes in aggregate demand and supply produce a(n):

higher price level

expansion of real output and a stable price level

decline in real output and a stable price level

expansion of real output and a higher price level